High oil and steel prices have had a negative impact on world economic growth in 2005. The International Monetary Fund (IMF) expects the world economy to grow by 4.3 % in 2005. Economic output in all the world’s key regions rose by 5.1 % in 2004, a growth rate not seen for 30 years. However, the growth momentum declined somewhat during the latter half of the year.

According to the Organization for Economic Cooperation and Development (OECD), the high oil and steel prices are impacting the euro-zone more acutely than other parts of the world. The European economy is suffering from low consumer demand, and rising energy prices are expected to continue to have an unfavorable effect on consumer behavior. Exports are being subjected to additional pressure from the strong euro. The OECD predicts that member states of the European Union (EU) will experience growth of 1.2 % in 2005 (2004: 1.8 %).

The German economy continues to lag behind the economic performance of other EU member states in 2005. Economic research institutes project that, after a weak first half, exports and capital investment will indeed rise during the second half of 2005, but that gross domestic product will increase by 1.0 % at most. Weak domestic demand, primarily the result of the poor conditions in the labor market and the resultant uncertainty, is hindering economic growth.

The most important engine of growth of the global economy remains the United States. In 2004, U.S. gross domestic product (GDP) rose 4.2 %. For 2005, the IMF projects GDP growth of 3.5 %. Latin America again achieved strong growth after overcoming some crises.

Asia saw continuing growth in 2005. According to the Asian Development Bank (ADB), local economies are set to grow by an average of 6.6 %. However, this growth will also have a negative effect on the world economy: Strong economic growth in Asia, particularly in China, is one of the causes behind the increase in the prices of oil and raw materials such as steel.

(Sources: International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD) and the Asian Development Bank (ADB))

Currency Trends.
The U.S. dollar depreciated significantly against the euro during the year under review. At its peak, the euro was worth US$ 1.36, but by the end of the fiscal year, the euro’s momentum had weakened significantly with one euro worth US$ 1.20.